Comparison Guide · ISAs · First-Time Buyers · 2026
Help to Buy ISA vs Lifetime ISA 2026 — Which Is Better for First-Time Buyers?
The Help to Buy ISA closed to new applicants in November 2019 — but existing holders can keep saving until November 2029 and claim the bonus until December 2030. The Lifetime ISA (LISA) is the only government-bonus scheme now open to first-time buyers, offering a 25% bonus (up to £1,000/year) on contributions up to £4,000/year. Here is how the two schemes compare and what to do if you have both.
Help to Buy ISA: What Existing Holders Need to Know
The Help to Buy ISA was launched in December 2015 and closed to new applicants on 30 November 2019. If you opened an account before that date, the key dates are:
- Savings deadline: 30 November 2029 — you can continue contributing up to £200/month until this date
- Bonus claim deadline: 1 December 2030 — your conveyancer must claim the bonus through the government's scheme manager by this date
- Maximum bonus: £3,000 (on savings of £12,000)
- Minimum bonus: £400 (minimum savings of £1,600 required)
The HTB ISA bonus is paid at completion of a first-home purchase — it goes to your conveyancer, not directly to you, and cannot be used as part of your exchange deposit. This is an important practical distinction: the bonus is not available until the moment the purchase completes.
Lifetime ISA: The Only Open Option in 2026
The Lifetime ISA was introduced in April 2017. It is available to anyone aged 18 to 39 (you must open the account before your 40th birthday). You can contribute up to £4,000 per tax year (within your overall £20,000 ISA annual allowance) and receive a 25% government bonus — up to £1,000 per year. Contributions can continue until age 50.
The LISA can be used for two qualifying purposes: buying a first home (priced up to £450,000) or retirement from age 60. If you withdraw for any other reason, you pay a 25% withdrawal charge on the entire amount — which claws back the bonus and takes an additional 6.25% of your own money.
Head-to-Head Comparison
| Feature | Help to Buy ISA | Lifetime ISA |
|---|---|---|
| Open to new applicants? | No — closed Nov 2019 | Yes — age 18-39 |
| Government bonus | 25% on savings | 25% on contributions |
| Annual contribution limit | £2,400 (£200/month) | £4,000 |
| Maximum annual bonus | £600/year | £1,000/year |
| Maximum total bonus (lifetime) | £3,000 | Unlimited (£1,000/yr until 50) |
| Property price cap | £250k (£450k London) | £450k nationwide |
| Penalty for non-qualifying withdrawal | Bonus not received | 25% on total (loses bonus + 6.25% of own funds) |
| Alternative use (non-property) | None — close account | Retirement from age 60, tax-free |
| Bonus paid when? | At completion via conveyancer | Monthly into account |
| Can be used for retirement? | No | Yes (from age 60) |
The Property Price Cap: A Critical Difference
The most practically important difference for buyers outside London is the property price cap. The HTB ISA caps at £250,000 outside London — a figure that now excludes a large proportion of properties in many English cities. Oxford, Cambridge, Bristol, Bath and large parts of the South East now have median house prices above £300,000.
The LISA cap is £450,000 nationwide — the same in Edinburgh, Manchester, and rural Wales as in London. This means the LISA is applicable to a far wider range of properties, and existing HTB ISA holders who are buying in an area where prices exceed £250,000 should ensure they have a LISA in place to use the government bonus.
The LISA Withdrawal Penalty: How the Maths Works
The 25% withdrawal charge catches many LISA holders by surprise because it is applied to the total account balance (contributions plus bonus), not just the bonus. This means a non-qualifying withdrawal actually leaves you with less than your own contributions.
Worked example: You contribute £4,000 to a LISA. The government adds a £1,000 bonus. Your account balance is £5,000. If you then make a non-qualifying withdrawal, the 25% charge is 25% of £5,000 = £1,250. You receive £5,000 minus £1,250 = £3,750 — which is £250 less than your original £4,000 contribution. The effective penalty on your own money is 6.25%.
This means the LISA should not be used as a general savings account or emergency fund. Only put money into a LISA that you are confident will go towards a qualifying first home purchase or will be kept until age 60 for retirement.
Combining HTB ISA and LISA on the Same Purchase
Since April 2017, you can legally hold both a Help to Buy ISA and a Lifetime ISA simultaneously. However, HMRC rules state that you can only use the government bonus from one of the two schemes towards a single first-home purchase.
The practical strategies:
- Use LISA bonus for property, keep HTB ISA savings: You claim the LISA bonus at completion. Your HTB ISA savings are simply withdrawn as cash (without bonus) to add to your deposit. This is likely the best strategy if your property costs between £250k and £450k (outside London), as the HTB ISA bonus would not apply anyway.
- Use HTB ISA bonus for property, keep LISA for retirement: If your property costs under £250k (outside London), you could claim the HTB ISA bonus through your conveyancer and leave the LISA to grow for retirement (accessed tax-free from 60). The HTB ISA maximum bonus of £3,000 is lower than the potential LISA bonus over many years of saving, so this is rarely optimal unless the LISA balance is small.
Cash LISA vs Stocks-and-Shares LISA
The Lifetime ISA is available in two forms: cash (deposit-based, paying a fixed interest rate) and stocks-and-shares (invested in funds). The choice depends on your timeline:
- Buyers planning to purchase within 1-3 years
- Risk-averse savers who need a predictable balance
- Those close to the £450,000 property cap (no buffer for losses)
- Current rates: 3.5-4.5% AER with leading providers
- FSCS protection up to £85,000
- Buyers with a 5+ year horizon before purchase
- Those using the LISA primarily for retirement
- Investors comfortable with market volatility
- Historically, equities outperform cash over 10+ years
- 25% bonus on contributions amplifies compound returns
LISA as a Retirement Vehicle
For self-employed first-time buyers who do not benefit from employer pension contributions, the LISA offers a competitive alternative or supplement to a SIPP. The 25% government bonus is equivalent to basic-rate tax relief on a pension contribution. However:
- LISA access is from age 60 (pensions from 57 from 2028); for planning purposes the LISA locks money away slightly longer
- The LISA annual allowance is only £4,000; a pension annual allowance is up to £60,000
- Higher-rate taxpayers get 40% pension tax relief vs only 25% on a LISA — pensions are more tax-efficient for higher earners
- LISA withdrawals in retirement are tax-free; pension withdrawals (beyond the 25% tax-free cash) are taxable as income
For basic-rate taxpayers without access to employer contributions, a LISA and a SIPP are roughly equivalent in tax efficiency. Using both up to their limits is generally optimal.
The Verdict for First-Time Buyers in 2026
If you do not have a Help to Buy ISA, the Lifetime ISA is your only option for a government-bonus first-time buyer scheme. Open one before your 40th birthday. If you have both, run them in parallel — save into the LISA for the bonus (use it for the property or retirement), and continue contributing to the HTB ISA as a regular savings pot until November 2029.
The LISA delivers more total bonus than the HTB ISA for most buyers — especially those buying at prices above £250,000 outside London. The withdrawal penalty is the key risk to manage: do not contribute to a LISA money you might need before buying a qualifying property.